1. The Policy that is great for your agent may not be great for you
Agents can help you navigate different auto policies, but some auto insurers use “contingent commissions” to compensate agents that sell their policies. Agents may earn commissions for signing with a particular carrier, some agents push certain policies to real a larger commission. Meanwhile, agents many earn profit-based commission, when clients don’t file a lot of costly claims. This leads some agents to delay or discourage claims. How can you protect yourself? Ask about commissions and have the agent explain their recommendation.
2. Young Drivers Can Catch a Break
While it generally takes three years of driving experience to be quote a lower rate, there are ways to ensure a better rate. You can avoid sports car and opt for a car with a lower engine capacity. Some insurers also give a lower rate to young driver who completes a defensive driving course. Ask you insurer about potential discounts.
3. Bad Credit Can Cost You
Many insurers factor in credit history, before you shop for insurance make sure you get your credit report from each of the three bureaus—TransUnion, Experian, and Equifax—and check for errors. Since the 1990s, insurers have discovered a strong correlation between low credit scores and filing lots of claims.
4. How the insurer sets premiums is for them to know and us to figure out
Premiums very widely by state and as insurers continue to adopt complex pricing systems, not everyone is seeing a savings. Over the past decade, hundreds of variables have been added to the mix, including credit history, homeownership, and limits on past policies. Since each insurer interprets these variables differently, it can be tough to figure out how the insurer determines your premium.
5. Your repaired car is work less even though it runs like new
When the other party’s insurance is paying for repairs after an accident you have the right to opt for original manufacturer parts instead of generic aftermarket ones. However, a fully-repaired vehicle will often be worth less as a used car or trade-in than an identical car without the accident history.
Even if you can’t collect diminished value, consult your tax adviser because you might you able to wright it off on your tax return.
Also, it’s a good idea to hire a post repair inspector, both to ensure that the work was done properly and to assess diminished value.
6. Totaled your Car? Good Luck Collecting its Full Value
Auto insurance companies don’t typically get their valuations from such standard sources such as Kelley Blue Book or Edmunds.com. Instead, many use claims servicing companies, which consult proprietary databases to assess valuation. Some firms canvasses dealerships in local markets to build a database of comps.
If your car is totaled, you needn’t accept your insurer’s first offer. Go to Edmunds.com or AutoTrader.com to find better comps, and call the sellers listed on the insurer’s report to verify their price. No dice? If it’s a matter of $1,000 or more, hire your own appraiser and go through an appraisal- arbitration process.
7. Your Car is More Likely to be Declared Totaled
Many policyholders would prefer to have repairs covered except in severe accidents. However, that’s becoming increasingly difficult. An insurer’s rule of thumb is to deem a car totaled when repairs would exceed 70 percent of the vehicle’s value. And if your car’s frame is damaged, it can remain a safety hazard even when repaired. But if the damage is limited to a few minor, albeit expensive, components, you can appeal your insurer’s decision to total it.
8. “Your Mechanic Works for Us
The auto insurance industry has long relied on direct-repair programs, which function like HMOs for ailing cars, with insurers maintaining lists of recommended repair facilities. In the last decade, some insurers have taken the relationship a step further; in 2001, Allstate announced it was buying a nationwide chain of repair shops.
Whether it’s a network of preferred providers or outright ownership, such coziness between insurers and body shops makes consumer advocates nervous. It lets the insurers take too much control over the repair process. And when you have pressure to keep costs low, you sometimes see shortcuts in repairs.
More often than not, you have a choice whether or not to use the insurer-recommended shop. So should you? It’s convenient, and in some cases, policyholders who take their cars there can get their deductible reduced or waived. If you do take the “in-network” route, hire a post-repair inspector to make sure repairs are done properly.
9. Brand Loyalty is for Suckers
As auto insurers adopt elaborately-tiered pricing strategies, rates may very dramatically from company to company. You might be better off comparison-shopping once a year rather than automatically renewing your policy–especially if your own circumstances change. Start by getting online quotes and then be sure to ask an independent agent for quotes.
10. Switching Carriers Could Cost You
We have all seen the warning signs is our policy that if you don’t pay our premiums can cause our policy to be canceled. It might lead you to think that when you want to switch carriers, dropping the old insurer is as simple as stopping payment. Not so. If you don’t pay a bill for the next term, chances are your carrier won’t simply cancel the policy—it may also report your nonpayment to the credit bureaus. (Most insurers are required to give you a certain number of days’ notice before cancellation.) Also, your new carrier will see a cancellation in your history, which could mean you’ll pay higher rates or be declined.
To avoid the issue, get the proper documentation. Ask your current carrier for a policy cancellation form, and make sure the timing is right—that the ending date of your old policy coincides with the start date of your new one.
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